Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6
CASE NO.:
Appeal (civil) 3632 of 2006
PETITIONER:
Commissioner of Central Excise, Chandigarh
RESPONDENT:
M/s. Punjab Laminates Pvt. Ltd.
DATE OF JUDGMENT: 24/08/2006
BENCH:
S.B. Sinha & Dalveer Bhandari
JUDGMENT:
J U D G M E N T
[Arising out of S.L.P. (C) No. 15180 of 2004]
S.B. SINHA, J :
Leave granted.
Whether extended period of limitation envisaged under the proviso
appended to Section 11A of the Central Excise Act, 1944 (for short "the
Act") would apply to the facts and circumstances of the present case is
the question involved in this appeal.
Before adverting to the said question, however, we may notice the
basic fact of the matter which is not in dispute.
The Respondent herein manufactures paper based decorative
laminated sheets. The goods manufactured by the Respondent were
classified under Chapter 39 of the Custom Excise Tariff Act whereas
according to the Appellant it should have been classified as sub-heading
No. 4823.90. The classification for the year 1993 was approved by the
Revenue. By a letter dated 6.12.1994, it requested Respondent to
intimate the manufacturing process of the product, to which a reply was
sent by it in terms of its letter dated 7.12.1994 discloseing the
manufacturing process stating:
"Brief Manufacturing Process of Paper Based
Laminated Sheets
The process of manufacture of the above
products involving in three major stages is as
under:
1. Preparation of Reactive Mixtures like (i)
Melamine formaldehyde and (ii) Phenol
formaldehyde. The reactive mixture process
involves mixing of Melamine Powder with
Formaldehyde and Phenol with Formaldehyde
in separate chemical reaction vessels, separately
under high steam pressure and continuous
sterling. The reactive mixture are used for
treatment of various papers, used for the
manufacture of paper based laminated sheets.
2. Paper treating process:
Under the process absorbent Kraft paper is
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6
treated with Phenol Formaldehyde reactive
mixture and Overlay Tissue paper and design
prints or colour base papers are treated with
Melamine formaldehyde reactive mixture under
stream through chemical treating and drying
machine.
3. Hydraulic pressing process
This process is the last and final one which
involves hydraulic pressing of various layers
chemical mixture treated papers under high
hydraulic pressure and steam temperature.
During the process the reactive mixtures treated
papers are turning into a homogeneous
substance, which is called "PAPER BASED
LAMINATED SHEETS".
The raw materials used as under:
1. Unbleached Absorbent Kraft paper
2. Plain coloured and design printed base
paper
3. Barrier paper
4. Tissue paper
5. Polly-Propelone Filins
6. Melamine Powder
7. Phenol
8. Formaldehyde
9. Methanol (Mehtyl Alcohol)
10. Denatured spirit
11. Urea
12. Printing Inks for printing designs &
base paper
BRIEF PROCESS OF MANUFACTURE
Number of layers of unbleached Absorbent
Kraft paper treated with Phenol formaldehyde
Reactive mixtures are laid on a carrier steel
plate, on which one layer of each Melamine
formaldehyde reactive mixture treated base
paper and overlay tissue paper are laid with and
further high gloss mirror finished stainless steel
press mould is placed on the treated paper.
Similarly number of sets of reactive mixture
papers duly treated are made by using
polypropylene films for separating the sheets.
The above sets are then put into the flat bed of
hydraulic press for final pressing High pressure
temperature upto 1800 to 3200 per sq. inch and
temperature at 145 to 150 C is given. Thus the
sheets are prepared into a homogeneous mass is
called paper based laminated sheets.
End used
The end use of paper based laminated sheets are
mainly as follows:
i) Making furnitures
ii) Panelling purpose
iii) Interior furnishing of Rail coaches &
passenger buses etc. etc."
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6
Yet again, a query was raised in regard to the use of plastic as an
input for the manufacture of primal product, i.e., laminated sheets falling
under sub-heading No. 4823.90. A reply thereto was also sent by the
Respondent by a letter dated 22.12.1994 stating:
"It is intimated that we are using Phenol,
Melamine and Formaldehyde falling under
Chapter 29 of Central Excise Tariff. Further, it
is clarified that a gluing solution is obtained by
mixing of phenol and formaldehyde and
melamine and formaldehyde. At no stage any
product known as plastic or marketable as
plastic comes into existence. We are as such
not using plastic as an input in the manufacture
of paper based laminated sheets."
The question as to whether the product manufactured by the
Respondent would fall under Chapter 39 or Chapter 48 of the Central
Excise Tariff Act came up for consideration before this Court in Collector
of Central Excise, Hyderabad v. Bakelite Hylam Ltd. [(1997) 10 SCC
350] wherein it was held that in respect of such products classification as
provided for in Entry 39.20 would be applicable, stating:
"Note (d) clearly provides that products
consisting of glass fibres or sheets of paper
impregnated with plastics and compressed
together as in the present case, if they have a
hard and rigid character, would fall under
Chapter 39. If they have more the character of
paper or of articles of glass fibres, they would
be classified under Chapter 48 or Chapter 70, as
the case may be. The decorative laminated
sheets which have a hard and rigid character
are, therefore, classifiable under Chapter 39 and
not under Chapter 48. The appropriate entry is
3920.31/3920.37 which deals, inter alia, with
sheets of other plastics, rigid, laminated.
Decorative laminated sheets, therefore, cannot
be classified under Tariff Entry
4818.90/4823.90. CEGAT is not right in
classifying these under Entry 4818.90/4823.90."
The said view was reiterated by this Court in Decent Laminates
Private Limited v. Collector of Central Excise and Customs [2002 (146)
ELT 487]
A notice was issued on 9.12.1997 to the Respondent to show cause
as to why:
"(i) central excise duty amounting to Rs.
36,37,338.00 short paid on the goods cleared
during 08.01.1993 to 31.03.1994 should not be
recovered from them under Section 11A of the
Act by invoking the extended period of
limitation available under the proviso to said
Section 11A as the benefit of Notification No.
135/89-CE was willfully availed by them by
making mis-statement regarding the description
of the product manufactured by them in the
classification list effective from 08.01.1993.
(ii) Interest as leviable should not be
recovered from them under Section 11AB of the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6
Act; and
(iii) penal action should not be taken against
them under Rule 173Q of the Rules read with
Section 11AC of the Act for the aforesaid
contraventions."
Pursuant thereto or in furtherance thereof, cause was shown by
Respondent herein bringing to the Commissioner’s notice that the
classification list was approved by the Divisional Assistant Commissioner
on 8.1.1993 and again for the year 1994. It was contended that as and
when called upon to do so, Respondent had categorically stated about the
detailed manufacturing process involved and, thus, the authorities
concerned were at all material times aware thereof. It had been pointed
out that the authorities have cleared 1385494 sheets between 8.1.1993
and 31.3.1994 upon giving the benefit of the notification dated 12.5.1989
and in that view of the matter the extended period of five years available
under proviso to Section 11A of the Act was not applicable.
It was stated:
"The noticees strongly contend that they had
correctly availed the concessional rate of duty.
The noticees did not bonafide feel, at any stage
that they are using any plastic product for the
impregnation of the papersheets. They had
been using phenol for formal dehyd. and other
additives for preparation of a solution with
which the paper was being treated to obtain
paper based laminated sheets. The Hon’ble
Tribunal in the case of Meghdoot Laminates
P.Ltd. Vs. C.C.E. 1990 (49) ELT 75 had held
that the products are classifiable under Chapter
48 and not Chapter 39 and accordingly entire
industry had classified products under chapter
heading 4823.90 and availed the benefit of
Notfn. 135/89 dt. 12.5.89, which also referred to
the products to be falling under sub-heading
4823.90. Since the duty had been paid by
availing the benefit of Notfn. No. 135/89 as per
practice being followed in the industry and as
per approval of classification list granted by the
competent authority it cannot be said that
exemption has incorrectly been availed."
[Emphasis supplied]
It was further stated:
"\005The solution of Phenol Formal dehyd. and
Melamine was being prepared in house and it
was being considered in the industry as Resin
and was honestly described as such in the
classification list."
The Commissioner of Excise rejected the said contention of the
Respondent. Aggrieved thereby and dissatisfied therewith Respondent
preferred an appeal before the Custom Excise and Service Tax Appellate
Tribunal. By reason of the impugned judgment, the same has been
allowed opining that although the benefit of the said notification was not
available if the manufactured goods were coated with plastic but held:
"\005Therefore, the proper officer before
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6
approving the classification list extending the
benefit of notification, should have satisfied
himself that the product is not coated with
plastic. The onus of proving the classification
list correctly is on the department as held by the
Tribunal in the case of Muzafarnagar Steel.
The Assistant Collector is, indeed, required to
make such inquiry and summon such
information as may be called for in order to
arrive at the correct decision\005"
It was opined that the entire demand pertaining to the period
8.1.1993 to 31.3.1994 was hit by the time limit specified under Section
11A(1) of the Act.
A proceeding under Section 11A of the Act indisputably could be
initiated within a period of six months, as the law thence stood. The
period of six months has been extended to one year in year 2000. The
proviso appended to Section 11A of the Act extending the period of
limitation is required to be applied if the conditions precedent therefor are
satisfied. The manufacturing process indisputably was disclosed by
Respondent. It is not in dispute that the question as regards classification
of the decorative laminated sheets being falling under Chapter 39 of the
Central Excise Tariff and not under Chapter Heading 48 had been
operating in the field. It is also not in dispute that the issue as regards
applicability of the exemption in terms of notification No. 135/89 was
incidental to the basic classification of the product.
It is difficult to believe that although the Respondent, prior to
8.1.1993, had been paying duty at the rate of 35% ad valorem, the benefit
of notification No. 135/89 dated 12.5.1989 had been accorded to it
without any verification and only on the basis of the statements made by
the Respondent.
At no point of time, the Revenue doubted the correctness or
otherwise of the manufacturing process or the ingredients disclosed by
the Respondent. The stand of the Respondent that the Industry as such
had adopted the same manufacturing process and had been extended the
benefit of the Exemption Notification of 1989 has not been called in
question. If the stand of the manufacturer is correct, there was no reason
as to why it should be singled out.
This Court decided Bakelite Hylam Ltd. (supra) on 10th March,
1997. The impugned notice was issued only on 9.12.1997 evidently
relying on or on the basis thereof.
It is not a case where the Respondents had not disclosed the
activities of manufacturing products carried out by them by declaration or
otherwise. They responded to each and every query of the Appellant, as
and when called upon to do so. The authorities of the Appellant must
have verified the said disclosures. At least they are expected to do so.
The disclosure made by the Respondent was acceptable to them. Their
bona fide was never questioned.
The applicability of the extended period of limitation is, therefore,
required to be considered in the aforementioned context. Proviso, it is
trite, provides for an exception. It is not the rule. A case, therefore, has
to be made out for attracting the same.
In Primella Sanitary Products Pvt. Ltd. v. Collector of C.Ex., Goa
[2005 (184) ELT 117] a Three-Judge Bench of this Court was dealing
with a case where a concession was made by a counsel appearing on
behalf of the Revenue. The court opined that although the item was put
under right classification list but they had not been permitted to take a
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6
different stand stating:
"\005As the matter of classification has proceeded
on a matter of concession of facts we do not
allow the Appellants to withdraw from that
concession. They are now not permitted to
argue on the question of classification\005"
In Pahwa Chemicals Private Limited v. Commissioner of C.Ex.,
Delhi [2005 (189) ELT 257], this Court held:
"The Appellants have all along claimed that
merely because they were affixing the label of a
foreign party, they did not lose the benefit of
Notification No. 175/86-C.E. as amended by
Notification No. 1/93 \026 C.E. The view taken by
the Appellants had, in some cases, been
approved by the Tribunal which had held that
mere use of the name of a foreign party did not
dis-entitle a party from getting benefit of the
Notifications. It is only after Larger Bench held
in Namtech Systems Limited v. Commissioner
of Central Excise, New Delhi reported in 2000
(115) E.L.T. 238 (Tribunal) that the position has
become clear. It is settled law that mere failure
to declare does not amount to willful mis-
declaration or willful suppression. There must
be some positive act on the part of the party to
establish either willful mis-declaration or
willful suppression. When all facts are before
the Department and a party in the belief that
affixing of a label makes no difference does not
make a declaration, then there would be no
willful mis-declaration or willful suppression.
If the Department felt that the party was not
entitled to the benefit of the Notification, it was
for the Department to immediately take up the
contention that the benefit of the Notification
was lost."
Keeping in view the peculiar facts and circumstances of this case,
we are of the opinion that it is not a fit case where this Court should
interfere. The appeal is, therefore, dismissed. The parties shall, however,
pay and bear their own costs.